Withholding of State Income Tax

Waddell & Reed Services Company may withhold state income tax on certain distributions made from retirement accounts where Fiduciary Trust Company of New Hampshire serves as custodian.

The Plan Types that may be subject to state income tax are:

IRAs (including Traditional, SEP, SARSEP & SIMPLE)

Roth IRAs

403(b)(7) Tax Sheltered Custodial Accounts (TSAs)

Profit Sharing and Money Purchase Plans (Keoghs)

Whether your retirement account(s) is/are subject to state withholding depends on, at the time of your distribution:

Your tax residence is within a state that requires state income tax to be withheld;

Federal income tax is withheld from your distribution;

The distribution amount is in excess of the state's exclusion amount (if applicable).

The respective state withholding will be reported on IRS Tax Form 1099-R.

Please refer to the chart below for a current list of states for which Waddell & Reed Services Company applies the mandated state income tax on certain distributions.

Required States with Withholding Tax Applied

State

Withholding Amount

State Exclusions

Eligible Rollover Distributions*

Arkansas

3% of redemption amount

No withholding for gross distributions less than $200.00

5% of redemption amount

California

10% of federal income tax amount

Not Applicable

Not Applicable

Delaware

5% of redemption amount unless W-4P is received

Not Applicable

Not Applicable

Iowa

5% of redemption amount rounded to the nearest whole dollar

Not Applicable

5% of redemption amount

Kansas

4.5% of redemption amount

No withholding for gross distributions less than $200.00

4.5% of redemption amount

Maine

5% of redemption amount rounded to the nearest whole dollar

Not Applicable

5% of redemption amount

Massachusetts

5.10% of redemption amount unless M-4P is received

Not Applicable

5.10% of redemption amount unless M-4P is received

Mississippi

5% of redemption amount rounded to the nearest whole dollar

State withholding applicable on only Premature distributions

Not Applicable

Maryland

Not required

Voluntary withholding except ERD's

7.75% of redemption amount

Nebraska

5% of redemption amount

IRC 408 plans (IRA, SEP, SIMPLE & SARSEP)

5% of redemption amount

North Carolina

4% of redemption amount rounded to the nearest whole dollar

No withholding for gross distributions less than $200.00

Not Applicable

Oklahoma

5% of redemption amount rounded to the nearest whole dollar

Not Applicable

5% of redemption amount

Oregon

8% of redemption amount

$10.00 Minimum

Not Applicable

Vermont

2.4% of redemption amount

No withholding for gross distributions less than $200.00

4.8% of redemption amount

Virginia

4% of redemption amount

IRC 408 plans (IRA, SEP, SIMPLE & SARSEP)

4% of redemption amount

*Eligible Rollover Distribution (ERD) refers to those distributions from Qualified Plans that are eligible to move between various fiduciary plan types (for example - 403(b), 401(k)) without tax consequences. These Qualified Plan types are referred to in Internal Revenue Code (IRC) 401(a) and include Profit Sharing, 401(k), Money Purchase Pension, Defined-Benefit, and ESOP. An ERD may also be from an IRC 403(b) (7) plan, which is for employees of non-profit institutions and public schools.

If an election is made to take an ERD from these plans in cash or "in kind" there is a mandatory 20% federal withholding. When this occurs, various states require withholding as indicated.

The tax information in this section of the website is for informational purposes only. It is not intended, and should not be construed, as a recommendation, or legal, tax, or investment advice. You should consult your tax advisor to answer questions about your specific situation or needs.

The products and services described in this website are for U.S. residents only. The products and services offered within this site are available through our financial advisors. Waddell & Reed financial advisors may only conduct business with residents of the states for which they are properly registered. Some products and services mentioned may not be available in all states or to all clients. Brokerage, investment and financial advisory services are made available through Waddell & Reed, Inc.

Certain Waddell & Reed offices are located in banks, credit unions and other financial institutions. Investment products offered by Waddell & Reed, Inc. on the premises of financial institutions are not insured by the FDIC, are not deposits or other obligations of the financial institution and are not guaranteed by the financial institution, and are subject to investment risks, including possible loss of the principal invested.

Investors should consider the investment objectives, risks, charges and expenses of a fund carefully before investing. For a prospectus, or if available, a summary prospectus, containing this and other information for the mutual funds offered by Waddell & Reed, call your financial advisor or click here. Please read the prospectus or summary prospectus carefully before investing.

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